Worldspace allegations over sale
Jan 22 and 23 saw a flurry of formal objections filed at the Delaware Bankruptcy Court which is looking after the Worldspace Chapter 11 restructuring. One claims Worldspace does not own everything on sale.
Most of the objections refer to understated debt amounts, with some showing considerable shortfalls in Worldspace’s calculations. Perhaps more important, however, was a detailed allegation from Worldspace’s Italian partners that the bankrupt broadcaster is deliberately attempting to sell “assets it does not own”.
Today (January 26) an auction of Worldspace assets is due to take place, and on Friday the Court is scheduled to decide who takes over the business, dependent on the bids made at today’s auction. The motions now before the Court could scupper those plans.
The major objection on Jan 23 was from New Satellite Radio SRL (NSR), the joint-venture business that Worldspace had in place with Italy’s Class Editori to develop a European radio system. NSR is claiming that Worldspace’s Chapter 11 forward plans, when the business is acquired by a new owner this week, would potentially see the Worldspace/NSR agreement assigned without preserving certain valuable rights.
The Italian filing to the Delaware Court states specifically that Worldspace “are attempting to sell assets it does not own, including the Worldspace NW AfriStar beam, the 40 channels utilising the beam, and other property already contributed to [Worldspace Italy] under the Partnership Agreement”.
The document continues, saying: “New Satellite Radio is a 35% owner of Worldspace Italy, with the balance owned by WSH, a Danish company. Worldspace directly owns 100% of WSH. Neither WSH nor Worldspace Italy are Debtors in this case and are not otherwise in bankruptcy. Worldspace Italy was formed to create and implement satellite radio in Italy. Worldspace Italy is incorporated in Italy.”
New Satellite Radio in its filing then explains how the above mentioned assets, and others, were ‘invested’ by Worldspace as their contribution to the Italian venture. The documents show that Worldspace Italy could use the 40 channels of bandwidth “free of charge” for 7 years. The document states that the Italian company has entered into various contracts with third parties to implement satellite radio in Italy, and has “performed substantially” all of its contributions to the Partnership Agreement, not least securing auto contracts with Fiat and Ferrari, procuring terrestrial repeater locations and installations, and obtained Italian broadcast authorisations.
NSR says it remains supportive of Worldspace being sold, but that the “efforts respect the Italian Project” and says that the sale motion is “premature”.
Other complaints came from electronics specialists Delphi, which outlined that Worldspace’s valuation of its debt obligations to Delphi is wrongly stated. Similar objections come from research institute Fraunhofer, Italian automaker Fiat, and others.